News and thoughts on the Real Estate Development & Construction

September 25, 2009

Value of time

I was at a General Contractor's field office the other day, and the white boards in the Conference Room (as usual) were all marked up with meeting notes.

However, the notes were not about best materials placement, or value engineering, they were about saving time. The board was filled with strategies on how to shave days off the schedule in order to get the project completed faster. They were not only measuring the days saved by certain measures, but also the days they'd be penalized if they didn't do something correctly leading to a net loss of time on the project.

Concurrently, I'm reading the book "Construction Funding: The Process of Real Estate Development, Appraisal, and Finance, 4th Edition" (which I highly recommend for those that want to know more about how Development actually happens). The book covers an end-to-end development process from the Developer's point of view. Reading about some of the extraordinary pressures the developer is under from investors, creditors and lenders regarding time, made me really understand the project's insistence on saving as much time as possible. The developer's time crunch becomes the GC's time crunch.

The takeaway for you is to remember that when you're selling in construction, the real cost to any project is the cost of time. You can always find more money to fund your project. There's always another investor, or getting the bank to lend you more capital, but no amount of money on Earth can buy back a day. A day lost is simply that. If you lose 15 iron beams, you can buy more. If you have to hire another person to get the job done, there's money built in for that. But there is no way you can buy time.

If you show your clients, especially owners, how what you're doing will save them time (which we all know is equal to money) you'll be talking directly to their primary concern and you'll get their attention.

Comments

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Jared, you've always got great insight and an excellent library!

We certainly strive to save the developer as many days as possible during the entitlement phase - I think that's one of our strong suits. The carrying cost of a project can be immense, particularly if it's a speculative one. If we can shave enough days to offset our fee, I feel like we've done our job. Your help in past projects has shown that it takes all team members to realize this importance... and that you've understood that even before reading this book.